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Turkish Lira (TRY) Exchange Rate Stronger after FOMC Announcement
Published: 20 Mar at 9 AM Tags: Euro Exchange Rate, Dollar Exchange Rate, Currency Exchange, Forex, Euro Crisis, Economy, Inflation,
A slight change of tone from the Federal Open Market Committee helped the Turkish Lira advance this week. Although the prospect of higher US interest rates is a negative for emerging-market economies like Turkey, the FOMC statement triggered an uptick in the Istanbul stock exchange and the Lira was pushed higher with it.
As projected by some industry experts, the Fed dropped the term ‘patience’ from its commentary on the projected path of interest rates, indicating that borrowing costs could be adjusted as soon as June. The announcement saw the Lira trading in the region of 2.57 against the US Dollar, down from previous levels of 2.64.
Although Turkey’s Economy Minister, Nihat Zeybekci, asserted that the Turkish economy would be adversely affected by higher US borrowing costs, he also insinuated that the quantitative easing programme and negative rates introduced by the European Central Bank were helping to turn the negatives positive.
According to industry expert Bora Tamer Yilmaz; ‘Diminishing Dollar concerns may provide a boost for Turkish assets.’ The Lira was also supported by the news that the Central Bank of the Republic of Turkey left interest rates unchanged earlier this week. The central bank had previously surprised markets by cutting borrowing costs after coming under duress from the government for not doing enough to counter inflation concerns, but the institution held its ground this time out. In a statement, the central bank commented; ‘The ongoing cautious monetary policy along with prudent fiscal and macro-prudential policies are having a favourable impact on inflation, especially inflation excluding energy and food [core inflation indicators, excluding energy and food products]. But uncertainty in global markets and elevated food prices necessitates maintaining a cautious stance in monetary policy. Accordingly, the committee decided to keep interest rates at current levels.’
Next week the Turkish Lira could experience volatility as a result of Turkey’s consumer confidence, business confidence, capacity utilisation and trade balance figures. US data will also be in the spotlight as positive reports could bring forward US interest rate hike expectations.
As projected by some industry experts, the Fed dropped the term ‘patience’ from its commentary on the projected path of interest rates, indicating that borrowing costs could be adjusted as soon as June. The announcement saw the Lira trading in the region of 2.57 against the US Dollar, down from previous levels of 2.64.
Although Turkey’s Economy Minister, Nihat Zeybekci, asserted that the Turkish economy would be adversely affected by higher US borrowing costs, he also insinuated that the quantitative easing programme and negative rates introduced by the European Central Bank were helping to turn the negatives positive.
According to industry expert Bora Tamer Yilmaz; ‘Diminishing Dollar concerns may provide a boost for Turkish assets.’ The Lira was also supported by the news that the Central Bank of the Republic of Turkey left interest rates unchanged earlier this week. The central bank had previously surprised markets by cutting borrowing costs after coming under duress from the government for not doing enough to counter inflation concerns, but the institution held its ground this time out. In a statement, the central bank commented; ‘The ongoing cautious monetary policy along with prudent fiscal and macro-prudential policies are having a favourable impact on inflation, especially inflation excluding energy and food [core inflation indicators, excluding energy and food products]. But uncertainty in global markets and elevated food prices necessitates maintaining a cautious stance in monetary policy. Accordingly, the committee decided to keep interest rates at current levels.’
Next week the Turkish Lira could experience volatility as a result of Turkey’s consumer confidence, business confidence, capacity utilisation and trade balance figures. US data will also be in the spotlight as positive reports could bring forward US interest rate hike expectations.
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Source: moneytransfer.co.uk